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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19750
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MATRIX PHARMACEUTICAL, INC.
(Exact name of Registrant as specified in its charter)
----------------------
Delaware 94-2957068
-------- ----------
(State of incorporation) (I.R.S. Employer
Identification Number)
34700 Campus Drive
Fremont, California 94555
(Address of principal executive offices)
(510) 742-9900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock , $.01 par value, outstanding as of the latest
practicable date.
22,115,453 shares
As of October 31, 1998
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<TABLE>
MATRIX PHARMACEUTICAL, INC.
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
<CAPTION>
Page
<S> <C>
Item 1. Financial Statements:
a. Condensed Consolidated Balance Sheets
as of September 30, 1998 and December 31, 1997................................. 2
b. Condensed Consolidated Statements of Operations
for the three and nine months ended September 30, 1998 and 1997................ 3
c. Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1998 and 1997.......................... 4
d. Notes to Condensed Consolidated Financial Statements............................ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................................................... 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk............................... 11
PART II
OTHER INFORMATION
Risk Factors............................................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders...................................... 20
Item 6. Exhibits and Reports on Form 8-K......................................................... 20
Signatures............................................................................... 21
</TABLE>
1
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<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Balance Sheets
(In thousands)
<CAPTION>
September 30, December 31,
1998 1997
--------- ---------
(Unaudited) (*)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................................................... $ 21,569 $ 19,719
Short-term investments .......................................................... 43,829 40,666
Other current assets ............................................................ 3,306 2,128
--------- ---------
Total current assets ...................................................... 68,704 62,513
Property and equipment, net .......................................................... 13,939 26,742
Non-current investments .............................................................. 10,017 19,983
Deposits and other assets, net ....................................................... 1,218 1,191
--------- ---------
Total assets .............................................................. $ 93,878 $ 110,429
========= =========
LIABILITIES
Current liabilities:
Accounts payable ................................................................ $ 1,122 $ 2,800
Accruals for special charges .................................................... 578 2,063
Accrued clinical trial costs .................................................... 1,432 1,788
Other accrued liabilities ....................................................... 6,558 2,681
Current portion of debt and capital lease obligations ........................... 1,805 2,283
--------- ---------
Total current liabilities ................................................. 11,495 11,615
Debt and capital lease obligations, less current portion ............................. 15,185 20,248
Deferred other income ................................................................ 5,032 1,913
--------- ---------
Total long-term liabilities ............................................... 20,217 22,161
STOCKHOLDERS' EQUITY
Capital stock ................................................................... 225,237 225,144
Notes receivable from shareholders .............................................. (1,813) (2,313)
Other ........................................................................... (192) (558)
Deficit accumulated during the development stage ................................ (161,066) (145,620)
--------- ---------
Total stockholders' equity ................................................ 62,166 76,653
--------- ---------
$ 93,878 $ 110,429
========= =========
<FN>
(*) Derived from audited financial statements.
See accompanying notes
</FN>
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<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Statements of Operations
(In thousands except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues ................................................................... $ -- $ -- $ -- $ --
Costs and expenses:
Research and development ................................................ 5,028 7,182 16,129 21,525
In-License Fee .......................................................... 4,000 -- 4,000 --
General and administrative .............................................. 1,831 3,808 4,937 12,221
Special Charges ......................................................... -- 4,518 -- 4,518
-------- -------- -------- --------
Total costs and expenses ............................................. 10,859 15,508 25,066 38,264
-------- -------- -------- --------
Loss from operations ....................................................... (10,859) (15,508) (25,066) (38,264)
Gain on sale and leaseback transaction ..................................... 113 -- 1,995 --
Interest and other income, net ............................................. 1,234 1,644 7,625 4,871
-------- -------- -------- --------
1,347 1,644 9,620 4,871
-------- -------- -------- --------
Net loss ................................................................... $ (9,512) $(13,864) $(15,446) $(33,393)
======== ======== ======== ========
Net loss per share: basic and diluted ..................................... $ (0.43) $ (0.64) $ (0.70) $ (1.56)
======== ======== ======== ========
Weighted average shares used in computing
basic and diluted net loss per common share ................................ 22,088 21,706 22,004 21,414
======== ======== ======== ========
<FN>
See accompanying notes
</FN>
</TABLE>
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<TABLE>
MATRIX PHARMACEUTICAL, INC.
(a development stage company)
Condensed Consolidated Statements of Cash Flows
(In thousands)
<CAPTION>
For the Nine Months
Ended September 30
1998 1997
-------- --------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................................................ $(15,446) (33,393)
Adjustments to reconcile net loss to net cash used by operating
activities:
Depreciation, amortization, and other ............................................ 2,233 1,051
Gain on sale and leaseback transaction ........................................... (1,882) --
Amortization of deferred income .................................................. (773) --
Changes in assets and liabilities:
Inventory ........................................................................ -- 758
Accruals for special charges ..................................................... (1,485) 2,867
Deferred other income ............................................................ -- 2,613
Other changes in assets and liabilities .......................................... 638 (422)
-------- --------
Net cash used by operating activities ........................................... (16,715) (26,526)
Cash flows from investing activities:
Capital expenditures ................................................................ (518) (7,410)
Proceeds from sale of fixed assets .................................................. 17,744 --
Investment in securities available-for-sale ......................................... (26,926) (16,000)
Maturities of investments ........................................................... 33,729 34,000
-------- --------
Cash flows provided by investing activities ...................................... 24,029 10,590
Cash flows from financing activities:
Repayment of mortgage loan from sale ................................................ (9,840) --
Payments on debt and capital lease obligations ...................................... (1,701) (563)
Net cash proceeds from:
Debt and capital lease financing ................................................. 6,000 24
Capital stock .................................................................... 45 399
Payments on notes receivable from shareholders ................................... 32 --
-------- --------
Cash flows used by financing activities .......................................... (5,464) (140)
Net increase (decrease) in cash and cash equivalents ....................................... 1,850 (16,076)
Cash and cash equivalents at the beginning of period ....................................... 19,719 20,138
======== ========
Cash and cash equivalents at the end of period ............................................. $ 21,569 4,062
======== ========
<FN>
See accompanying notes
</FN>
</TABLE>
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MATRIX PHARMACEUTICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
1. Basis of presentation
The condensed consolidated balance sheet as of September 30,
1998, the condensed consolidated statements of operations for the three
months and nine months ended September 30, 1998 and 1997, and the
condensed consolidated statements of cash flows for the nine months
ended September 30, 1998 and 1997 have been prepared by the Company,
without audit. In the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations, and cash flows at
September 30, 1998 and for all periods presented have been made. The
condensed consolidated balance sheet at December 31, 1997 has been
derived from the audited financial statements at that date.
Certain information and footnote disclosures normally included
in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to the Securities and Exchange Commission's rules and regulations.
The condensed financial statements should be read in
conjunction with the Company's audited financial statements as included
in the Company's Annual Report on Form 10-K for the year ended December
31, 1997 as filed with the Securities and Exchange Commission. The
results of operations for the three months and nine months ended
September 30, 1998 are not necessarily indicative of the results to be
expected for any subsequent quarter or for the entire fiscal year
ending December 31, 1998.
2. Principles of consolidation
The consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary after elimination of all
material intercompany balances and transactions.
3. Basic and diluted net loss per common share
Basic and diluted net loss per common share is computed in
conformance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), which the Company adopted during
1997. Accordingly, the weighted average number of shares of common
stock outstanding are used while common stock equivalents, consisting
of stock options and stock rights, are excluded from the computation as
their impact is anti-dilutive.
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4. Cash and cash equivalents, short-term investments, and non-current
investments
The Company invests its excess cash in government and
corporate debt securities. Highly liquid investments with maturities of
three months or less at the date of acquisition are considered by the
Company to be cash equivalents. Investments with maturities beyond
three months at the date of acquisition and that mature within one year
from the balance sheet date are considered to be short-term
investments. Investments with maturities longer than one year from the
balance sheet date are classified as short-term investments or
non-current investments based on the Company's intended holding period.
The Company determines the appropriate classification of debt
securities at the time of purchase and reevaluates such designation as
of each balance sheet date. Debt securities which are not classified as
held-to-maturity and which are not held for resale in anticipation of
short-term market movements are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the
unrealized gains and losses, net of tax, reported in a separate
component of stockholder's equity. Realized gains and losses and
declines in value judged to be other-than-temporary are included in
interest and other income. The cost of securities sold is based on the
specific identification method.
5. Gain on sale and leaseback transaction
In March 1998, the Company completed an agreement with a real
estate investment trust for the sale and leaseback of its San Diego
office/laboratory and manufacturing facility and an adjacent parcel of
land. The transaction was structured as an $18,400,000 purchase and a
$6,000,000 convertible loan secured by specific manufacturing related
building improvements. Under the terms of the agreement, the Company
will lease the facility for 13 years with the option to renew up to an
additional 25 years. Matrix will pay an average $2,800,000 in annual
lease expense. Currently this rental income is partially offset by
rental income from a portion of the facility leased to another
bio-pharmaceutical company whose lease expires January 15, 1999. The
Company is currently seeking to rent this portion of the facility
following the expiration of the existing lease. Net cash from the lease
and loan agreement, after the payment of the existing mortgage and
escrow and other related fees, totals approximately $14,000,000 and
will be used to fund operating expenses and capital purchases. The
total gain on the transaction is $5,769,000 of which $1,882,000 has
been recognized as an immediate gain in the first quarter of 1998 while
the remaining balance has been deferred and is being recorded to income
over the 13-year lease term.
6. Litigation settlement
In April 1998, the Company received $4,000,000 from an
insurance company for the reimbursement of legal expenses incurred
during prior years. The payment settles litigation between the Company
and the insurer over coverage under the Company's general liability
policy. The payment was recorded as other income.
7. New accounting pronouncements
As of January 1, 1998, the Company adopted Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS 130"). SFAS
130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of this
Statement had no impact on the
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Company's net income or shareholders' equity. SFAS 130 requires
unrealized gains or losses on the Company's available-for-sale
securities and foreign currency translation adjustments, which prior to
adoption were reported separately in shareholders' equity to be
included in other comprehensive income. Prior year financial statements
have been reclassified to conform to requirements of SFAS 130.
During the third quarter of 1998 and 1997, total comprehensive
loss amounted to $9,366,000 and $13,926,000, respectively. For the
first nine months of 1998 and 1997, total comprehensive loss amounted
to $15,346,000 and $33,467,000, respectively.
Effective January 1, 1998, the Company adopted the Financial
Accounting Standards Board's Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information ("SFAS 131"). SFAS 131 superseded the Financial
Accounting Standards Board ("FASB") Statement No. 14, Financial
Reporting for Segments of a Business Enterprise. SFAS 131 establishes
standards for the way that public business enterprises report
information about operating segments in annual financial statements and
requires that those enterprises report selected information about
operating segments in interim financial reports. SFAS 131 also
establishes standards for related disclosures about products and
services, geographic areas, and major customers. The adoption of SFAS
131 did not affect the results of operations, financial position, or
the disclosure of segment information.
7
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
This Form 10-Q may contain, in addition to historical information,
forward-looking statements, including without limitation, statements regarding
the timing and outcome of regulatory reviews and clinical trials. Any such
forward-looking statements are based on management's current expectations and
are subject to a number of risks and uncertainties that could cause actual
results to differ materially from expected results. For additional information,
including risk factors, such as no assurance of regulatory approvals;
uncertainties associated with clinical trials; history of losses; future
profitability uncertain; additional financing requirements and uncertain access
to capital markets; limited manufacturing and sales and marketing experience;
dependence on sources of supply; uncertainty regarding patents and proprietary
rights; rapid technological change and substantial competition; uncertainty of
pharmaceutical pricing; no assurance of adequate reimbursement; dependence upon
qualified and key personnel; product liability exposure; limited insurance
coverage; hazardous materials and product risks; volatility of stock price; no
dividends; anti-takeover provisions and year 2000 compliance, please see the
"Risk Factors" section included in the Company's 1997 Annual Report on Form 10-K
and in this Form 10-Q as well as other factors discussed below and elsewhere in
this report.
Results of Operations
Three Months and Nine Months Ended September 30, 1998 and 1997
Since the Company's inception in 1985, the primary focus of its
operations has been research and development, and, to date, it has not received
any revenues from the commercial sale of products. The Company has a history of
operating losses and expects to incur substantial additional losses over the
next several years as it continues to develop its products. For the period from
its inception to September 30, 1998, the Company has incurred a cumulative net
loss of $161,066,000.
The Company had no revenue in the third quarters of 1998 and 1997 or in
the first nine months of 1998 and 1997.
Research and development expenses for the third quarter of 1998
decreased by 30% to $5,028,000 compared to $7,182,000 for the third quarter of
1997. For the first nine months of 1998, research and development expenses
decreased by 25% to $16,129,000 compared to $21,525,000 for the same period in
1997. The decrease was primarily due to lower personnel costs, the termination
of clinical trials for AccuSite(TM) Injectable Gel which were in progress during
the first nine months of 1997, lower consulting expenses and lower purchases of
operation supplies and materials. The decrease was partially offset by higher
building rent expense which began in the second quarter of 1998 in connection
with the sale and leaseback transaction for the San Diego facility.
License fee expense for the three and nine months ended September 30,
1998 was $4,000,000. There were no license fees in the three and nine months
ended September 30, 1997. This increase in license fees was due to a new
agreement to in-license a systemic anticancer agent known as FMdC which is in
the early stages of clinical development.
8
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General and administrative expenses for the third quarter of 1998
decreased 52% to $1,831,000 compared to $3,808,000 for the third quarter of
1997. For the first nine months of 1998, general and administrative expenses
decreased by 60% to $4,937,000 compared to $12,221,000 for the same period in
1997. The decreases were primarily due to lower litigation-related legal
expenses, the absence of AccuSite-related product marketing expenses, lower
recruiting fees and lower personnel costs.
During the third quarter of 1997 the Company recorded restructuring
costs of $4,518,000 in connection with the decision to suspend further
development and commercialization of AccuSite(TM) (fluorouracil/epinephrine)
Injectable Gel. Management suspended the AccuSite program after being notified
that the Food and Drug Administration ("FDA") was not prepared to approve
AccuSite as a treatment for genital warts. Restructuring costs were incurred to
conclude the clinical trials and commercial programs associated with AccuSite
and allow the Company to focus its resources on its oncology drug development
programs. Pursuant to the plan, the Company had effected a workforce reduction
of approximately 70 employees, written off inventory and manufacturing equipment
related to AccuSite and shut down its manufacturing facilities in Northern
California.
In March 1998, the Company completed an agreement with a real estate
investment trust for the sale and leaseback of its San Diego office/laboratory
and manufacturing facility and an adjacent parcel of land. The transaction was
structured as an $18,400,000 purchase and a $6,000,000 convertible loan secured
by specific manufacturing related building improvements. Under the terms of the
agreement, the Company will lease the facility for 13 years with the option to
renew up to an additional 25 years. The Company will pay an average $2,800,000
in annual lease and interest expense. Currently this rental income is partially
offset by rental income from a portion of the facility leased to another
bio-pharmaceutical company whose lease expires January 15, 1999. The Company is
currently seeking to rent this portion of the facility following the expiration
of the existing lease. Net cash from the sale and loan agreements, after the
payment of the existing mortgage and escrow and other related fees, totals
approximately $14,000,000 and will be used to fund operating expenses and
capital purchases. The net gain on the transaction is $5,769,000 of which
$1,882,000 was recognized in the first quarter of 1998. The balance has been
deferred and is being recorded as income over the 13 year lease term.
Net interest and other income decreased by 25% to $1,234,000 for the
third quarter of 1998 compared to $1,644,000 for the third quarter of 1997. This
decrease was due to lower average balances in cash and investments as well as
higher interest expense as a result of equipment financing obligations which
began in the third quarter of 1997. For the first nine months of 1998, net
interest and other income increased by 57% to $7,625,000 compared to $4,871,000
for the same period in 1997. This was due to $4,000,000 received from a
settlement with an insurance company which was recorded as other income,
partially offset by the decline in interest income and higher interest expense.
Liquidity and Capital Resources
At September 30, 1998, the Company had aggregate cash and marketable
securities of $75,415,000 as compared to $80,368,000 at December 31, 1997. The
Company used $16,715,000 and $26,526,000 for operating activities for the nine
months ended September 30, 1998 and September 30, 1997, respectively.
In September 1998, the Company entered into an agreement to license a
systemic anticancer agent known as FMdC for $4,000,000. The license fee was
recorded in the third quarter of 1998 and was paid on October 22, 1998.
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As discussed in "Results of Operations," in March 1998, the Company
completed an agreement with a real estate investment trust for the sale and
leaseback of its San Diego facility and an adjacent parcel of land and entered
into a loan agreement. Net cash from the sale and loan agreement, after the
payment of the existing mortgage and escrow and other related fees, totaled
approximately $14,000,000 and is being used to fund operating expenses and
capital purchases.
In September 1995, the Company repurchased from Medeva PLC all
marketing rights related to its AccuSite product for $2,000,000. As of September
30, 1998, the remaining balance of this obligation was $1,000,000 payable as
$500,000 per year in 1999 and 2000.
The Company has financed its operations and capital asset acquisitions
from its inception through the sale of equity securities, interest income, and
capital lease and debt financing. The Company expects to finance its continued
operating requirements principally with cash on hand as well as additional
capital that may be generated through equity and debt financings and
collaborative agreements.
The Company's working capital and capital requirements will depend on
numerous factors, including the progress of the Company's research and
development programs, preclinical testing and clinical trial activities, the
timing and cost of obtaining regulatory approvals, the levels of resources that
the Company devotes to the development of manufacturing and marketing
capabilities, technological advances and the status of competitors.
The Company expects to incur substantial additional costs relating to
the continued clinical development of its oncology products, continued research
and development programs, the development of manufacturing capabilities, and
general working capital requirements. The Company anticipates that its existing
and committed capital resources will enable it to maintain its current and
planned operations at least through 2000. The Company may require additional
outside financing to complete the process of bringing current products to
market, and there can be no assurance that such financing will be available on
favorable terms, if at all.
Year 2000 Compliance
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
The Company has formed a Year 2000 TASK Force to determine what actions
are required to resolve year 2000 issues. A systems assessment is being
performed and conversion is expected to be completed by the third quarter of
1999.
During 1997, the Company installed a new accounting system that was
confirmed by the vendor to address the year 2000 related issues. The Company has
analyzed other external factors, such as the impact on significant company
vendors, and has determined that the related potential effect on the Company's
business, financial condition or the Company results of operations will not be
material. At the current stage of the assessment process, total projected costs
of implementing year 2000 requirements are not expected to exceed $150,000.
10
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
11
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PART II. OTHER INFORMATION
RISK FACTORS
No Assurance of Regulatory Approvals
The preclinical and clinical testing, manufacturing, and marketing of
the Company's products are subject to extensive regulation by numerous
governmental authorities in the United States and other countries, including,
but not limited to, the Food and Drug Administration ("FDA"). Among other
requirements, FDA approval of the Company's product candidate, including a
review of its manufacturing processes and production facilities, is required
before such product candidate may be marketed in the United States. Similarly,
marketing approval by a foreign governmental authority is typically required
before such products may be marketed in a particular foreign country. Matrix has
no products approved by the FDA and although AccuSite has been approved by
foreign authorities, Matrix does not expect to achieve profitable operations
unless other product candidates now under development receive FDA and foreign
regulatory approval and are thereafter commercialized successfully.
In order to obtain FDA approval, the Company must demonstrate to the
satisfaction of the FDA that the Company's product candidate is safe and
effective for its intended uses and is manufactured in conformity with the FDA's
Good Manufacturing Practices ("GMP") regulations. The Company has had only
limited experience in submitting and pursuing regulatory applications. The
process of obtaining FDA approvals can be costly, time consuming and subject to
unanticipated delays. There can be no assurance that such approvals will be
granted to the Company on a timely basis, or at all.
The process of obtaining FDA regulatory approval involves a number of
steps that, taken together, may involve seven years or more from the initiation
of clinical trials and require the expenditure of substantial resources. Among
other requirements, this process requires that the product undergo extensive
preclinical and clinical testing and that the Company file a New Drug
Application ("NDA") requesting FDA approval. When a product contains more than
one component that contributes to the product's effect, as do some of the
Company's current product candidates, the FDA may request that additional data
be submitted in order to demonstrate the contribution of each such component to
clinical efficacy. In addition, when there has been a manufacturing change in a
product component (either in the process by which the component is manufactured
or the site at which it is manufactured) during product development, as is the
case with the collagen gel used in the Company's products, the FDA may request
that additional data be submitted to demonstrate that the manufacturing change
has not affected the clinical performance of the product. In addition, the
manufacturing facilities for a product must be inspected and accepted by the FDA
as being in compliance with GMP regulations prior to approval of the product.
During the first quarter of 1998, the Company closed its manufacturing
facilities in San Jose and Milpitas, California and consolidated manufacturing
personnel at the Company's San Diego production facility. There can be no
assurance that the Company's San Diego manufacturing facility will be accepted
by the FDA in the future, and failure to receive or maintain such acceptance
would have a material adverse effect on the Company's business.
The Company's analysis of the results of its clinical studies submitted
as part of an NDA is subject to review and interpretation by the FDA, which may
differ from the Company's analysis. There can be no assurance that the Company's
data or its interpretation of that data will be accepted by the FDA. In
addition, changes in applicable law or FDA policy during the period of product
development and FDA regulatory review may result in the delay or rejection of an
NDA filed by the Company. Any failure to obtain, or delay in obtaining, FDA
approvals would adversely affect the ability of the Company
12
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to market its proposed products. Moreover, even if FDA approval is granted, such
approval may include significant limitations on indicated uses for which a
product could be marketed.
Before and after approval is obtained, a product, its manufacturer, and
the holder of the NDA for the product are subject to comprehensive regulatory
oversight. Violations of regulatory requirements at any stage, including the
preclinical and clinical testing process, the approval process or after
approval, may result in adverse consequences, including the FDA's delay in
approving or refusal to approve a product, withdrawal of an approved product
from the market, and/or the imposition of criminal penalties against the
manufacturer and/or the NDA holder. In addition, the subsequent discovery of
previously unknown problems relating to a marketed product may result in
restrictions on such product, manufacturer, or the NDA holder, including
withdrawal of the product from the market. Also, new government requirements may
be established that could delay or prevent regulatory approval of the Company's
products under development.
Matrix filed an NDA for AccuSite Injectable Gel for treatment of
condyloma (genital warts) with the FDA in 1995. The FDA has issued two action
(non-approvable) letters with respect to the Company's application. An action
letter received in September 1997 reiterated concerns expressed by the FDA in
December 1996 about the safety profile of AccuSite and, in particular, about the
persistence in certain AccuSite-treated patients of a bump-like thickening or
swelling (induration) at the site of injection. The Company believes the
clinical data for AccuSite, including supplementary data submitted to the agency
in March 1997 as an amendment to the NDA, are supportive of the safety and
efficacy of the product in this indication. The Company continues to pursue
approval of the AccuSite NDA. However, the Company does not intend to invest
substantial Company resources in this pursuit and believes it is unlikely that
AccuSite will be cleared for marketing in the United States. Accordingly, the
Company has indefinitely suspended further development and commercialization
programs related to AccuSite.
The processes required by European regulatory authorities before the
Company's products can be marketed in Western Europe are similar to those in the
United States. First, appropriate preclinical laboratory and animal tests as
well as analytical product quality tests must be done, followed by submission of
a clinical trial exemption or similar documentation before human clinical trials
can be initiated. Upon completion of adequate and well-controlled clinical
trials in humans that establish that the drug is safe and efficacious,
regulatory approval must be obtained from the relevant regulatory authorities.
AccuSite has been approved in Belgium, Denmark, Germany, Finland,
Ireland, Italy, Luxembourg, The Netherlands and the United Kingdom. A regulatory
decision is expected in 1998 in France. The Company continues to evaluate
whether, in the absence of commercialization in the United States, it may be
cost effective to market AccuSite in Europe through local partners.
Commercialization of AccuSite in Europe would, in certain markets, also require
the negotiation of satisfactory pricing with local governments. At this point,
the Company does not intend to commercialize AccuSite in Europe. There can be no
assurance that the Company will develop the distribution agreements and
regulatory approvals, including pricing approvals, that would be necessary to
commercialize AccuSite in Europe.
Uncertainties Associated with Clinical Trials
Matrix has conducted and plans to continue to undertake extensive and
costly clinical testing to assess the safety and efficacy of its potential
products. Failure to comply with FDA regulations applicable to clinical testing
can result in delay, suspension, or cancellation of such testing, and/or refusal
by the FDA to accept the results of such testing. In addition, the FDA or the
Company may modify or suspend clinical trials at any time if it concludes that
the subjects or patients participating in
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<PAGE>
such trials are being exposed to unacceptable health risks. Further, there can
be no assurance that human clinical testing will show any current or future
product candidate to be safe and effective or provide data suitable for
submission to the FDA.
The Company is currently conducting multiple clinical trials in the
United States and certain foreign countries, including four ongoing Phase III
trials. The rate of completion of the Company's clinical trials is dependent
upon, among other factors, the rate of patient enrollment. Patient enrollment is
a function of many factors, including the size of the patient population, the
nature of the protocol, the proximity of patients to clinical sites and the
eligibility criteria for the study. The Company has experienced slower than
planned accrual of patients in its ongoing Phase III trials. The two supportive
Phase III trials have completed enrollment. However, the two registration
directed trials have not been fully enrolled. Further delays in completing
enrollment in these trials or delays in other clinical studies may result in
increased costs and delays, which could have a material adverse effect on the
Company. Generally, similar considerations apply to clinical testing that is
subject to regulatory oversight by foreign authorities and/or that is intended
to be used in connection with foreign marketing applications.
History of Losses; Future Profitability Uncertain
Matrix was incorporated in 1985 and has experienced significant losses
since that date. As of September 30, 1998, the Company's accumulated deficit was
approximately $161,066,000. The Company has not generated revenues from its
products or product candidates and expects to incur significant additional
losses over the next several years. In order to achieve a profitable level of
operations, the Company must successfully develop products, obtain regulatory
approvals for its products, enter into agreements for product commercialization
outside the United States, and develop an effective sales and marketing
organization in the United States. No assurance can be given that the Company's
product development efforts will be completed, that required regulatory
approvals will be obtained, that any products will be manufactured and marketed
successfully, or that profitability will be achieved.
Additional Financing Requirements and Uncertain Access to Capital Markets
The Company has expended and will continue to expend substantial funds
to complete the research and development of its product candidates. The Company
may require additional funds for these purposes through additional equity or
debt financings, collaborative arrangements with corporate partners or from
other sources. No assurance can be given that such additional funds will be
available on acceptable terms, if at all. If adequate funds are not available
from operations or additional sources of financing, the Company's business could
be materially and adversely affected. Based on its current operating plan, the
Company anticipates that its existing capital resources will be adequate to
satisfy its capital needs through 2000. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Limited Manufacturing and Sales and Marketing Experience
The Company intends to market and sell certain of its product
candidates, if successfully developed and approved, through its own dedicated
sales force in the United States and through pharmaceutical licensees in Europe.
There can be no assurance that the Company will be able to establish a
successful direct sales organization or co-promotion or distribution
arrangements. In addition, there can be no assurance that resources will be
available to the Company to fund marketing and sales expenses, many of which
must be incurred before sales commence. Failure to establish a marketing and
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<PAGE>
sales capability in the United States and/or outside the United States may have
a material adverse effect on the Company.
The Company's ability to conduct clinical trials on a timely basis, to
obtain regulatory approvals and to commercialize its products will depend in
part upon its ability to manufacture its products, either directly or through
third parties, at a competitive cost and in accordance with applicable FDA and
other regulatory requirements, including GMP regulations. The Company closed
manufacturing facilities in San Jose and Milpitas, California in March 1998 and
transferred manufacturing personnel to a research and manufacturing facility in
San Diego, California that was acquired in 1995 to meet the Company's
anticipated long-term commercial scale production requirements. The Company
expects that the San Diego facility and contract manufacturers should provide
sufficient production capacity to meet clinical requirements. There can be no
assurance that the Company will be able to validate this facility in a timely
manner or that this facility will be adequate for Matrix's long-term needs
without delaying the Company's ability to meet product demand or to manufacture
in a cost-effective manner. Matrix expects to continue to use selected contract
manufacturers, in addition to its own manufacturing capability, for some or all
of its product components. Failure to establish additional manufacturing
capacity on a timely basis may have a material adverse effect on the Company.
Dependence on Sources of Supply
Several of the materials used in the Company's products are available
from a limited number of suppliers. These items, including collagen gel and
various bulk drug substances used in the Company's products, have generally been
available to Matrix and others in the pharmaceutical industry on commercially
reasonable terms. If the Company's manufacturing facilities are not able to
produce sufficient quantities of collagen gel in accordance with applicable
regulations, the Company would have to obtain collagen gel from another source
and gain regulatory approval for that source. There can be no assurance that the
Company would be able to locate an alternative, cost-effective source of supply
of collagen gel. Matrix has negotiated and intends to continue to negotiate
supply agreements, as appropriate, for the raw materials and components utilized
in its products. Any interruption of supply could have a material adverse effect
on the Company's ability to manufacture its products, complete clinical trials,
or commercialize products. In addition, the Company's ability to commercialize
its IntraDose Injectable Gel product in the United States could be limited by
the issuance in 1996 of a U.S. patent for cisplatin, a chemotherapeutic drug
that is the active compound in IntraDose, if the newly-issued patent were upheld
and if IntraDose were found to infringe that patent, and if the Company were
unable to obtain a license under that patent. See "--Uncertainty Regarding
Patents and Proprietary Rights."
Uncertainty Regarding Patents and Proprietary Rights
The Company's success depends in part on its ability to obtain patent
protection for its products and to preserve its trade secrets and operate
without infringing on the proprietary rights of third parties. No assurance can
be given that the Company's pending patent applications will be approved or that
any patents will provide competitive advantages for the Company's products or
will not be successfully challenged or circumvented by its competitors. The
Company has not conducted an exhaustive patent search and no assurance can be
given that patents do not exist or could not be filed which would have a
material adverse effect on the Company's ability to market its products or
maintain its competitive position with respect to its products. The Company's
patents may not prevent others from developing competitive products using
related technology. Other companies that obtain patents claiming products or
processes useful to the Company may bring infringement actions against the
Company. As a result, the Company may be required to obtain licenses from others
to develop, manufacture or market its products.
15
<PAGE>
There can be no assurance that the Company will be able to obtain any such
licenses on commercially reasonable terms, if at all. The Company also relies on
trade secrets and proprietary know-how which it seeks to protect, in part, by
confidentiality agreements with its employees, consultants, suppliers and
licensees. There can be no assurance that these agreements will not be breached,
that the Company would have adequate remedies for any breach, or that the
Company's trade secrets will not otherwise become known or be independently
developed by competitors.
No assurance can be given that any patent issued to, or licensed by,
the Company will provide protection that has commercial significance. In this
regard, the patent position of pharmaceutical compounds and compositions is
particularly uncertain. Even issued patents may later be modified or revoked by
the United States Patent and Trademark Office ("PTO") in proceedings instituted
by Matrix or others. In addition, no assurance can be given that the Company's
patents will afford protection against competitors with similar compounds or
technologies, that others will not obtain patents with claims similar to those
covered by the Company's patents or applications, or that the patents of others
will not have an adverse effect on the ability of the Company to do business.
In 1996, for instance, a composition-of-matter patent for the cytotoxic
drug cisplatin was granted in the United States to a pharmaceutical company
whose use patent on cisplatin as an anti-tumor agent expired in December 1996.
The Company, on advice of patent counsel, believes that the Company's IntraDose
product, which contains cisplatin, does not infringe this patent and also that
new patent may have been improperly awarded and should be found invalid and/or
unenforceable. However, if the new patent on cisplatin is upheld and if
IntraDose were found to infringe that patent, there can be no assurance that the
Company would be able to obtain a license to the patent on commercially
reasonable terms, if at all, in order to commercialize IntraDose in the United
States.
The Company believes that obtaining foreign patents may be more
difficult than obtaining domestic patents because of differences in patent laws,
and recognizes that its patent position therefore may be stronger in the United
States than abroad. In addition, the protection provided by foreign patents,
once they are obtained, may be weaker than that provided by domestic patents.
Rapid Technological Change and Substantial Competition
The pharmaceutical industry is subject to rapid and substantial
technological change. Technological competition in the industry from
pharmaceutical and biotechnology companies, universities, governmental entities
and others diversifying into the field is intense and is expected to increase.
Most of these entities have significantly greater research and development
capabilities, as well as substantially more marketing, financial and managerial
resources than the Company, and represent significant competition for the
Company. Acquisitions of, or investments in, competing biotechnology companies
by large pharmaceutical companies could increase such competitors' financial,
marketing and other resources. There can be no assurance that developments by
others will not render the Company's products or technologies noncompetitive or
that the Company will be able to keep pace with technological developments.
Competitors have developed or are in the process of developing technologies that
are, or in the future may be, the basis for competitive products. Some of these
products may have an entirely different approach or means of accomplishing
similar therapeutic effects than products being developed by the Company. These
competing products may be more effective and less costly than the products
developed by the Company. In addition, conventional drug therapy, surgery and
other more familiar treatments and modalities will compete with the Company's
products.
Any product which the Company succeeds in developing and for which it
gains regulatory approval must then compete for market acceptance and market
share. Accordingly, important
16
<PAGE>
competitive factors, in addition to completion of clinical testing and the
receipt of regulatory approval, will include product efficacy, safety, timing
and scope of regulatory approvals, availability of supply, marketing and sales
capability, reimbursement coverage, pricing and patent protection.
Uncertainty of Pharmaceutical Pricing; No Assurance of Adequate Reimbursement
The future revenues, profitability, and availability of capital for
biopharmaceutical companies may be affected by the continuing efforts of
governmental and third party payers to contain or reduce the costs of health
care through various means. For example, in certain foreign markets pricing or
profitability of prescription pharmaceuticals is subject to government control.
In the United States, there have been, and the Company expects that there will
continue to be, a number of federal and state proposals to implement similar
government control. While the Company cannot predict whether any such
legislative or regulatory proposals will be adopted, the announcement or
adoption of such proposals could have a material adverse effect on the Company's
prospects.
The Company's ability to commercialize its products successfully will
depend in part on the extent to which appropriate reimbursement levels for the
cost of such products and related treatment are obtained from government
authorities, private health insurers and other organizations, such as health
maintenance organizations ("HMOs"). Third-party payers are increasingly
challenging the prices charged for medical products and services. Also, the
trend towards managed health care in the United States and the concurrent growth
of organizations such as HMOs, which could control or significantly influence
the purchase of health care services and products, as well as legislative
proposals to reform health care or reduce government insurance programs, may
limit prices the Company can charge for its products. The cost containment
measures that health care payers and providers are instituting and the effect of
any health care reform could adversely affect the Company's ability to sell its
products and may have a material adverse effect on the Company.
Dependence Upon Qualified and Key Personnel
Because of the specialized nature of the Company's business, the
Company's ability to maintain its competitive position depends on its ability to
attract and retain qualified management and scientific personnel. Competition
for such personnel is intense. There can be no assurance that the Company will
be able to continue to attract or retain such persons.
Product Liability Exposure; Limited Insurance Coverage
The Company faces an inherent business risk of exposure to product
liability claims in the event that the use of products during research or
commercialization results in adverse effects. While the Company will continue to
take appropriate precautions, there can be no assurance that it will avoid
significant product liability exposure. The Company maintains product liability
insurance for clinical studies. However, there can be no assurance that such
coverage will be adequate or that adequate insurance coverage for future
clinical or commercial activities will be available at all, or at an acceptable
cost, or that a product liability claim would not materially adversely affect
the business or financial condition of the Company.
Hazardous Materials and Product Risks
The Company's research and development involves the controlled use of
hazardous materials, such as cytotoxic drugs, other toxic and carcinogenic
chemicals and various radioactive compounds. Although the Company believes that
its safety procedures for handling and disposing of such materials
17
<PAGE>
comply with the standards prescribed by federal, state and local regulations,
the risk of accidental contamination or injury from these materials cannot be
completely eliminated. In the event of such an accident, the Company could be
held liable for any damages that result, and any such liability could be
extensive. The Company is also subject to substantial regulation relating to
occupational health and safety, environmental protection, hazardous substance
control, and waste management and disposal. The failure to comply with such
regulations could subject the Company to, among other things, fines and criminal
liability.
Certain chemotherapeutic agents employed by the Company in its
aqueous-based protein systems, Anhydrous Delivery Vehicles ("ADV"), and regional
delivery technology are known to have toxic side effects, particularly when used
in traditional methods of administration. Each product incorporating such a
chemotherapeutic agent will require separate FDA approval as a new drug under
the procedures specified above. Bovine collagen is a significant component of
the Company's protein matrix. Two rare autoimmune connective tissue conditions,
polymyositis and dermatomyositis ("PM/DM"), have been alleged to occur with
increased frequency in patients who have received cosmetic collagen treatments.
Based upon the occurrence of these conditions, the FDA requested a major
manufacturer of bovine collagen products for cosmetic applications to
investigate the safety of such uses of its collagen. In October 1991, an expert
panel convened by the FDA to examine this issue found no statistically
significant relationships between injectable collagen and the occurrence of
autoimmune disease, but noted that certain limitations in the available data
made it difficult to establish a statistically significant association.
In addition, bovine sourced materials are of some concern because of
transmission of Bovine Spongiform Encelphalopathy ("BSE"). The Company has taken
all precautions to minimize the risk of contamination of its collagen with BSE,
including the use of United States-sourced cow hides. The Committee For
Proprietary Medicinal Products ("CPMP"), a steering committee of the European
Medicines Evaluation Agency ("EMEA"), has classified materials made from bovine
skin products as showing no detectable infectivity, indicating minimal risk of
transmission of BSE.
Volatility of Stock Price; No Dividends
The market prices for securities of biopharmaceutical and biotechnology
companies (including the Company) have historically been highly volatile, and,
in addition, the market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Future announcements concerning the Company, its
competitors or other biopharmaceutical products, governmental regulation,
developments in patent or other proprietary rights, litigation or public concern
as to the safety of products developed by the Company or others and general
market conditions may have a significant effect on the market price of the
Common Stock. The Company has not paid any cash dividends on its Common Stock
and does not anticipate paying any dividends in the foreseeable future.
Anti-Takeover Provisions
Certain provisions of the Company's Certificate of Incorporation and
Bylaws may have the effect of making it more difficult for a third party to
acquire, or discouraging a third party from attempting to acquire control of the
Company. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Company's Common Stock. The
Company's Board of Directors has the authority to issue shares of Preferred
Stock and to determine the
18
<PAGE>
price, rights, preferences, privileges and restrictions of those shares without
any further vote or action by the stockholders.
The rights of the holders of Common Stock will be subject to, and may
be adversely affected by, the rights of the holders of any Preferred Stock that
may be issued in the future. The issuance of Preferred Stock, while providing
desirable flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock.
Certain provisions of Delaware law applicable to the Company could also delay or
make more difficult a merger, tender offer or proxy contest involving the
Company, including Section 203 of the Delaware General Corporation Law, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years unless certain conditions
are met.
Year 2000 Compliance
The Company is aware of the issues associated with the programming code
in existing computer systems as the millennium (year 2000) approaches. The "year
2000" problem is pervasive and complex as virtually every computer operation
will be affected in some way by the rollover of the two digit year value to 00.
The issue is whether computer systems will properly recognize date sensitive
information when the year changes to 2000. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail.
The Company has formed a Year 2000 Task Force to determine what actions
are required to resolve year 2000 issues. A systems assessment is being
performed and conversion is expected to be completed by the third quarter of
1999.
During 1997, the Company installed a new accounting system that was
confirmed by the vendor to address the year 2000 related issues. The Company has
analyzed other external factors, such as the impact on significant company
vendors, and has determined that the related potential effect on the Company's
business, financial condition or the Company results of operations will not be
material. At the current stage of the assessment process, total projected costs
of implementing year 2000 requirements are not expected to exceed $150,000.
19
<PAGE>
MATRIX PHARMACEUTICAL, INC.
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
* 10.59 License Agreement by and between Hoechst
Marion Roussel, Inc. and Matrix
Pharmaceutical, Inc. dated September 22,
1998
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no Current Reports on Form 8-K filed
during the quarter ended September 30, 1998.
* Confidential Treatment has been requested as to certain portions of this
Agreement
20
<PAGE>
MATRIX PHARMACEUTICAL, INC.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MATRIX PHARMACEUTICAL, INC.
Date: November 19, 1998 By: /s/ David Ludvigson
----------------- -------------------
David Ludvigson
Chief Financial Officer,
Senior Vice President
Signing on behalf of the registrant
and as principal financial and
accounting officer
21
LICENSE AGREEMENT
THIS LICENSE AGREEMENT (the "Agreement") effective as of the 22nd day
of September 1998, between HOECHST MARION ROUSSEL, INC., a corporation organized
under the laws of the State of Delaware with offices at Route 202-206, P.O. Box
6800, Bridgewater, NJ 08807-0800 ("HMR") and MATRIX PHARMACEUTICAL, INC., a
corporation organized under the laws of the State of Delaware and having its
principal office at 34700 Campus Drive, Fremont, CA 94555 ("Matrix," and
together the "Parties"),
RECITALS
WHEREAS, HMR is the owner of all right, title and interest in certain
patents and patent applications, identified in Appendix A hereto, and know-how
relating to a compound known as MDL 101,731; and
WHEREAS, Matrix desires to obtain certain exclusive worldwide licenses
from HMR under such patents and patent applications and know-how, and HMR, is
willing to grant to Matrix such licenses;
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "Affiliate" means any corporation, firm, partnership or other
entity, whether de jure or de facto, which directly or indirectly owns, is owned
by or is under common ownership with a party to this Agreement to the extent of
at least fifty percent (50%) of the equity (or such lesser percentage which is
the maximum allowed to be owned by a foreign corporation in a particular
jurisdiction) having the power to vote on or direct the affairs of the entity
and any person, firm, partnership, corporation or other entity actually
controlled by, controlling or under common control with a party to this
Agreement.
1.2 "Compound" means the composition of matter known as MDL 101,731
whose more specific chemical name is 2'- Fluoromethylene-2'-Deoxycytidine,
including any salts, hydrates, solvates, and/or stereoisomers thereof, including
any salts, hydrates, solvates and/or stereoisomers of such compounds, the
intellectual property rights to which are owned in whole or in part by HMR in
accordance with Article 2 of this Agreement as of the Effective Date or acquires
such right during the term of this Agreement.
1.3 "Development" means preclinical, clinical, pharmaceutical, and
chemical research on a Compound or Product conducted primarily with the intent,
and for the purpose, of generating data for submission to a regulatory authority
in the Territory in support of an application for governmental approval required
for commercializing Product for any indication.
1.4 "Effective Date" means the date as of which this Agreement is
effective and shall be the date of this Agreement first written above.
<PAGE>
1.5 "Enforceable Patent" as used in this Agreement means an issued,
unexpired Patent in a particular country within the Territory, where such Patent
contains a claim or claims which: (a) have not been held invalid or
unenforceable by a court or other legal or administrative tribunal from which no
appeal is or can be taken, and (b) is or are infringed by: (i) the sale of
Product, or (ii) the use of Compound or Product for any approved indication in
such country for Compound or Product.
1.6 "Field" means any and all fields in which a Product may have
application, including, without limitation, the prevention, treatment and/or
diagnosis of any disease or disorder.
1.7 "FDA" means the United States Food and Drug Administration.
1.8 "Know-How" means all technical information and know-how presently
developed and owned or controlled by HMR and its Affiliates, or developed and
owned or controlled by HMR and its Affiliates after the date hereof, which
relates to Compound or Product in the Field and which constitutes a proprietary
"trade secret" or other valid intellectual property right under U.S. or other
applicable law which is substantial, secret and identifiable, including, without
limitation, all biological, chemical, pharmacological, toxicological, clinical,
regulatory, analytical, quality control and manufacturing data and any other
information (whether technical or commercial) relating to Compound or Product
that may be useful for the Development, regulatory approval, manufacture and
commercialization of that Compound or Product.
1.9 "Liabilities" means liabilities of any kind or nature, primary or
secondary, direct or indirect, absolute or contingent, known or unknown, which
are caused by or allegedly caused by the manufacture, marketing, promotion,
distribution, use or sale of the Product, including without limitation, any
liabilities for claims of personal injury or death, and all reasonable
attorneys' fees incurred in connection with the defense of any such claims.
1.10 "MAA Approval" means Marketing Authorization Application approval
by the appropriate regulatory agency(ies) for commercialization of a Compound or
Product in a Major European Country.
1.11 "Major Country" means any one of [*].
1.12 "NDA" means a New Drug Application in accordance with the
requirements of the FDA.
1.13 "Net Sales" means gross sales of Products sold by Matrix, its
Affiliates and licensees to unaffiliated third parties in the Territory, less
the total of: (a) trade, cash and/or quantity discounts; (b) excise, sales and
other consumption taxes and customs duties to the extent included in the invoice
price; (c) freight, insurance and other transportation charges to the extent
included in the invoice price; (d) amounts repaid or credited by reason of
rejections and defects; (e) returns, or retroactive price reductions; and (f)
compulsory payments and rebates, accrued, paid or deducted pursuant to
agreements (including, but not limited to, managed care agreements) or
governmental regulations.
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
2
<PAGE>
The computation of Net Sales shall not include sales between or among a
party and its Affiliates or Sublicensees, except where such Affiliates or
Sublicensees are end users. For purposes of this License Agreement, sales of
Product to independent distributors, wholesalers or other parties who purchase
and take title to Product are considered to be sales to Third Parties. If
Product is sold through intermediaries such as agents or co-promoters who do not
purchase and take title to Product, royalties shall be due on Net Sales to Third
Parties who purchase Product through such intermediaries.
1.14 "Patents" means all patents and patent applications which are or
become owned by or licensed to HMR, or to which HMR otherwise has, now or in the
future, the right to grant licenses during the term of this Agreement, which
generically or specifically claim Compound or Product, a process for
manufacturing Compound or Product, an intermediate used in such process, a
method to formulate or deliver Compound or Product or a use of Compound or
Product. Included within the definition of Patents are any continuations,
continuations-in-part, divisions, patents of addition, reissues, renewals or
extensions thereof. Also included within the definition of Patents are any
patents or patent applications which generically or specifically claim any
improvements on Compound or Product or intermediates or manufacturing processes
required or useful for production of Compound or Product which are developed by
HMR, or which HMR otherwise has the right to grant licenses, now or in the
future, during the term of this Agreement. The current list of patent
applications and patents encompassed within Patents is set forth in Appendix A
attached hereto. Appendix A shall be updated by HMR on an annual basis.
1.15 "Product" means any bulk active ingredient or finished
pharmaceutical composition containing Compound as a pharmaceutically active
ingredient (either alone or in combination with one or more other
pharmaceutically active ingredients), for use in the Field.
1.16 "Sublicensee" means a Third Party (as defined below) to whom
Matrix sublicenses rights to manufacture and sell (or have manufactured and
sold) Product under Patents.
1.17 "Territory" means all the countries of the world except Japan [*].
1.18 "Third Party(ies)" means any party other than a party to this
Agreement or an Affiliate of Matrix or HMR.
2. GRANT [*]
2.1 HMR hereby grants to Matrix an exclusive license in the Field and
in the Territory, with the right to grant sublicenses, under Patents and
Know-How to develop, have developed, make, have made, use and sell Compound and
Product in the Territory, subject to the other terms and conditions of this
Agreement. [*]
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
3
<PAGE>
3. PAYMENTS AND ROYALTIES
3.1 In consideration for the exclusive license to Patents and Know-How
granted to Matrix under Section 2.1 hereof, Matrix shall pay HMR within thirty
(30) days of the first time Compound or Product reaches each of the following
milestones:
Effective Date [*]
[*] [*]
[*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
[*] [*]
Such payments shall be paid once by Matrix, even if multiple formulations or
other variations of Compound or Product achieve such milestones. As used in this
Section 3.1, the term "Initiation of pivotal trials to be used for registration"
means the first patient treated in a large scale, multi-center, pivotal efficacy
trial. The term "Notice of NDA or MAA Approval" means the first notification
from the FDA or equivalent regulatory agency, that Product is approved for
marketing and commercialization (and including pricing approval, if applicable)
by Matrix, its Affiliate or Sublicensee in the United States or Major European
Country. In any country where pricing approval is required and product launch is
permitted pending such pricing approval, payment under this Section 3.1 pursuant
to Notice of NDA or MAA Approval shall be triggered upon such launch.
3.2 Subject to Sections 8.1 and 3.4, as a consideration for the license
under Patents and Know-How granted to Matrix under this Agreement, Matrix shall
pay to HMR royalties in the following manner provided that, for purposes of this
Section 3.2, the Product sold is covered by an Enforceable Patent:
o [*]
- The first [*] of Annual Sales : [*] royalty on Net Sales
- All Annual Sales greater than [*]: [*] royalty on Net Sales
o [*]: [*] royalty on Net Sales.
3.3 Royalty obligations for a particular Product under Section 3.2
shall become effective in each country in the Territory at such time as an
Enforceable Patent is granted in such
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
4
<PAGE>
country. In the event that any legal or administrative proceeding is initiated
challenging the validity, scope or enforceability of such Enforceable Patent in
any country in the Territory, which, if successful, would relieve Matrix of its
royalty obligations under Section 3.2 in such country, Matrix shall continue to
pay royalties. However, upon the imposition of a final judgement in any such
proceeding, HMR shall promptly refund to Matrix any royalties paid during the
pendency of the proceeding in the event and to the extent that such judgement
invalidates the patent coverage for the Matrix Product in the relevant
country(ies); however, in no event shall the amount refunded result in an
effective royalty to HMR less than or equal to the minimum amounts set forth in
Section 3.4. In the event of any judgement requiring the payment by Matrix of
royalties or other damages ("Infringement Damages") to any Third Party as a
result of such judgement, Matrix shall be entitled to deduct such Infringement
Damages from payment otherwise owing to HMR, and HMR shall reimburse to Matrix
or pay the Third Party from amounts already collected from Matrix any
Infringement Damages for past infringement; provided, however, subject to
Section 3.4, the royalties payable to HMR shall not [*] Net Sales during the
term of this Agreement, unless such judgment includes an injunction against the
further sale of Product and the Infringement Damages equal or exceed Matrix's
net profit on the sale of Product in such country.
3.4 In those countries were no Enforceable Patents have issued during
the term of this Agreement, the royalty rate shall be [*] percent ([*]%) of Net
Sales; provided however, if a generic version of the Product is marketed in such
countries, the royalty rate in such country shall be reduced to [*] percent
([*]%) of Net Sales. In those countries were Enforceable Patents have expired or
have been held invalid during the term of this Agreement, the royalty rate shall
be [*] percent ([*]%) of Net Sales; provided however, if a generic version of
the Product is marketed in such countries, the royalty rate in such countries
shall be reduced to [*] percent ([*]%) of Net Sales.
3.5 For the purpose of calculating payments, the currency exchange
rates for converting any currency to US dollars shall be the exchange rate in
the key currency cross rates table in the final edition of The Wall Street
Journal (US Eastern Edition) or in the case the currency exchange rate is not
published in the Wall Street Journal, the midpoint of the closing bid and the
ask price of "Reuter's 2000 Information Service" historical databases, on the
last business day of each calendar quarter to which such payment relates. A
"business day" is a day on which banks are open for business in the country of
the currency to be translated.
Account information:
Citibank, New York
Hoechst Marion Roussel, Inc.
ABA# 021000089
Account # [*]
4. COMPULSORY LICENSES AND THIRD PARTY LICENSES
4.1 In the event that a governmental agency in any country within the
Territory grants or compels HMR to grant a license to any Third Party for
Compound or Product, Matrix shall
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
5
<PAGE>
have the benefit in such country of the terms granted to such Third Party to the
extent that such terms, taken as a whole, are more favorable to the Third Party
than those of this Agreement, provided that such Third Party commercializes such
Product in such country.
4.2 If a governmental authority in a country in the Territory imposes a
maximum royalty rate, such that lower royalty rates than would otherwise apply
under this Agreement are mandated in such country, then the royalty rates
provided for herein shall be reduced to equal such lower rates for sales of
Product in such country for the period such lower royalty rate is required by
any governmental authority and shall cease when Matrix's royalty payment
obligations to HMR cease under this Agreement.
4.3 If, during the term of this Agreement after consultation with HMR,
Matrix, in Matrix's sole discretion, determines that patent(s) of a Third Party
exists in the Territory covering the manufacture, use or sale of Compound or
Product, and it is impractical or impossible for Matrix or its Affiliates or
Sublicensees to continue the activity or activities licensed hereunder in the
Field without obtaining a royalty-bearing license from such Third Party under
such patent(s), then Matrix shall be entitled to enter into a license with such
Third Party and deduct from any royalties payable hereunder the royalties paid
to such Third Party or account of the Net Sales on which such royalties are
paid. Subject to Section 3.4, the royalties payable to HMR shall not be [*] Net
Sales during the term of this Agreement.
5. DEVELOPMENT
5.1 Matrix shall have full legal and financial responsibility for all
costs that are incurred and all activities that are undertaken after the signing
of this Agreement, which are related to Development, safety, and required
periodic reporting to the FDA and such equivalent regulatory agency, marketing,
regulatory approvals, price registrations, compliance with all applicable laws
and regulations, and other activities required by or of Matrix or its
Sublicensee(s) (or their respective agents or distributors) elsewhere in the
Territory to obtain appropriate government approvals for, and to commercialize,
Product in the Territory. Other than as expressly provided for herein Matrix
shall not assume, nor shall Matrix be liable for, any costs or activities
(whether scientific, financial or otherwise) relating to the Compound or Product
that were incurred or undertaken prior to the signing, of this Agreement
(including without limitation any costs, expenses, damages, losses, fines,
penalties or the like that may be awarded or assessed after the signing of this
Agreement, but which arise out of events and activities that occurred prior to
the signing of this Agreement).
5.2 Provided that the Affiliates, Sublicensees and other Third Parties
agree to substantially the same terms of confidentiality in Article 10 hereof,
Matrix may appoint such Affiliates, Sublicensee(s) and other Third Parties to
perform any and all Development activities necessary to obtain government
approvals for Product in the Territory.
5.3 Matrix shall, in a manner consistent with the effort Matrix devotes
to its own products having the same or similar potential value as Product,
exercise its reasonable commercial efforts and diligence in developing and
commercializing Product, and in undertaking those investigations and actions
required to obtain appropriate governmental approvals to market
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
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Product in the Territory. HMR shall use reasonable efforts to assist or provide
consultation at Matrix's expense in support of the Development of Compound or
Product, but in its discretion may limit its resources and assistance; provided,
however, that such limitation shall not apply to the HMR's obligation to provide
information and assistance as set forth in Sections 6.2, 10.1, and 10.2.
5.4 Development of the Product shall be governed by a separate written
plan attached as Appendix C ("Development Plan"), which shall be prepared by
Matrix and submitted to HMR for its information. The Development Plan will
describe the proposed overall program of Development for the Compound or
Product, including, process development, clinical studies and regulatory plans
and other elements of obtaining Regulatory Approval. The Development Plan will
be updated annually by Matrix and, together with any updates thereto, be
provided to HMR solely for its information.
5.5 If Product is not launched [*] by Matrix, its Affiliates and/or
Sublicensee within [*] after the date of receiving the approvals necessary to
commercialize Product (including, without limitation, pricing approval in those
jurisdictions wherein pricing approval is required) [*] HMR and Matrix shall
review the progress of launch efforts. Matrix shall keep HMR informed on a
regular basis of the status of its launch efforts after receiving the approvals
necessary to commercialize Product [*] until such time that launch is achieved
[*]. If other than for reasons beyond the reasonable control of Matrix, launch
[*] is not achieved within [*] after the date of receiving such approvals
necessary to commercialize Product in such country(ies), then the license
granted by this Agreement shall terminate, but only with respect to the
particular country where launch was not achieved within such [*] time frame, as
the case may be, unless the Parties agree in writing to extend such time frame.
If, upon receipt of any such notification HMR determines that it desires to
itself or through an Affiliate commercialize such Product in a country in which
Matrix foresees difficulty, then HMR shall discuss with Matrix appropriate
compensation for Matrix's efforts in bringing such Product to market.
5.6 Any inventions or discoveries or improvements which arise from
Matrix's, its Affiliate's or Sublicensee's work relating to the Development
and/or manufacture of the Compound and/or Product shall be owned by Matrix. HMR
shall have the right of first negotiation to license any such invention,
discovery or improvement.
6. COMPOUND & PRODUCT SUPPLY
6.1 HMR shall deliver its entire existing supply of Product to Matrix
and at least one (1) Product lot that is fully conforming with the Compound
specifications as defined in the IND ("Compound Specifications") under the
following conditions:
(a) Within sixty (60) days with respect to bulk active
ingredient and within thirty (30) days with respect to finished product, of
written notice by Matrix to HMR, HMR shall, at its own cost (including without
limitation, duties, tariffs and the like), ship to Matrix or its designee [*]
all existing quantities of Product.
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
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<PAGE>
(b) Title to, and risk of loss with respect to, all Product
supplied by HMR to Matrix under this Section 6.1 shall pass to Matrix upon the
receipt of such Product by Matrix or its designee at their point of delivery.
(c) HMR shall provide available existing testing information
on the Product, and shall transfer the analytical methods. Prior to shipment of
Product to Matrix, HMR shall test an agreed upon lot of bulk active ingredient
for conformance with the Compound Specifications and provide such test data to
Matrix. HMR shall test an agreed upon stability time point for the drug products
which are on stability.
(d) Matrix agrees to inspect each shipment of Product within
thirty (30) days of receipt to determine whether such shipment is in conformity
with the Compound Specifications or whether there exists any defects which can
be detected upon ordinary diligent examination of the shipment. If any portion
of the shipment is not in conformity with the foregoing, Matrix may reject the
non conforming shipment by giving notice of rejection to HMR as follows: i) in
case of any defects arising out of a breach by HMR which could be detected upon
ordinary diligent examination when the shipment was received, within six (6)
days after the date of receipt of the shipment by Matrix; and ii) in the case of
other defects (except any defect arising out of a breach by Matrix), within
thirty (30) days after the date of receipt of the shipment by Matrix.
(e) If Matrix notifies HMR of any non-conformance of Product
with the Compound Specifications therefor, the Parties shall discuss in good
faith such non-conformance and if it cannot be resolved within thirty (30) days,
the Parties shall have an independent reputable laboratory, reasonably
acceptable to both Parties, test representative samples from such shipment, and
the results of such laboratory shall be final and binding on the Parties. The
Party whose determination is not upheld by the laboratory's results shall bear
the costs of such testing.
(f) The Parties shall continue to perform the testing and
verification steps on HMR's existing supply of bulk active ingredient as set
forth in Sections 6.1(c)-(e) until a bulk active ingredient lot is delivered to
Matrix that is fully conforming with the Compound Specifications. In the event
that no such existing lot is fully conforming with Compound Specifications, HMR
shall provide Matrix, at HMR's expense, with one (1) lot of twenty (20)
kilograms of bulk active ingredient fully conforming with Compound
Specifications.
6.2 HMR shall provide information and assistance to Matrix with respect
to Product as follows:
(a) Upon the signing of this Agreement, HMR shall deliver to
Matrix any and all Know-How, documentation, data, and other information owned or
controlled by HMR and its Affiliates, that Matrix may reasonably require for the
manufacture of Product in the Territory, such information and technology
transfer to be accomplished within three (3) months after the Agreement is
signed. Such information and technology transfer shall include without
limitation the specifications for Product and methods of analysis for testing
Product, as currently described within the IND regulatory documentation
including Chemistry/Manufacturing/Controls (CMC) information amendments and the
technology transfer file, and all manufacturing records for the
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<PAGE>
Product generated by contract manufacturers. At the end of such three (3) month
period, the parties shall discuss in good faith whether the information and
technology transfer process has been satisfactorily completed. In the event that
Matrix feels it has not appropriately received such information or related
assistance, then the parties shall in good faith determine an alternative
procedure to properly complete such transition process, and the Parties shall
implement such procedure during the three (3) months immediately following such
determination. Thereafter and for the remaining term of this Agreement, HMR
shall be obligated to provide only such assistance to Matrix which is limited to
material historical information and technology.
(b) HMR shall provide to Matrix or its designated Third Party
assistance for the transfer of manufacturing technology, through documentation,
consultation and face-to-face meetings, to enable Matrix or Third Party to
proceed with development of commercial-scale manufacturing. If requested by
Matrix or the Third Party, HMR shall designate appropriate personnel reasonably
acceptable to Matrix, who shall visit the designated manufacturing facility,
with the limitation of three (3) visits, not to exceed a total of ten (10)
business days, within one (1) year after the Agreement is signed, for which
Matrix shall bear all the costs of travel and other out-of-pocket expenses.
(c) To the extent that Matrix from time to time requires
materials contained in laboratory notebooks of HMR employees (past or present)
with respect to the manufacture, use in clinical trials, governmental approvals
or otherwise of Compound or Product, HMR shall make either such laboratory
notebooks or appropriate excerpts therefrom (excerpting unrelated information
dealing with other products) available to Matrix as promptly as possible.
6.3 HMR represents and warrants that:
(a) all Product supplied hereunder shall meet the Compound
Specifications therefor at the time Product are delivered to Matrix or its
designee;
(b) all Product supplied hereunder shall be manufactured,
stored and shipped in accordance with GMPs and all other applicable laws and
regulations;
(c) none of the Product supplied hereunder shall be
adulterated or misbranded as provided for under applicable laws and regulations.
6.4 Matrix represents and warrants that all Product supplied hereunder
for use in humans shall be manufactured, stored and shipped in accordance with
GMPs and all other applicable laws and regulations.
6.5 Upon the Effective Date, Matrix shall be solely responsible for
handling Product complaints, and reporting Product complaints as required by the
authorities in the Territory. However, HMR will cooperate to provide data in its
possession which may be necessary in connection with such matters.
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<PAGE>
7. REGULATORY AND LEGAL REQUIREMENTS
7.1 Upon the Effective Date, Matrix shall be responsible for
maintaining the global drug surveillance database for the Product, and shall
support any other HMR licensee of the Compound or Product to the extent such
licensees are willing to enter into an agreement with Matrix whereby any such
licensee (a) assumes reporting obligations from the database for its own
territory; and (b) agrees to provide and provides Matrix with all required
information from its own territory to add to the database. Matrix shall be
responsible for adverse event reporting only in its own Territory.
7.2 Matrix agrees throughout the duration of this Agreement to maintain
records and otherwise establish procedures to assure compliance with all
regulatory, professional, or other legal requirements which apply to the
Development, manufacturing, promotion and marketing of Compound or Product.
8. TERM AND TERMINATION
8.1 Matrix's royalty obligations for a particular Product under Section
3.2 in each country of the Territory shall be [*] upon the expiration or
invalidation of the last remaining Enforceable Patent in such country.
Expiration of this Agreement or Matrix's royalty or payment obligations with
respect to a particular Product under this Article 8 shall not preclude Matrix
from continuing to market any Product and to use Know-How anywhere in the
Territory without further royalty or other payments.
8.2 [RESERVED]
8.3 Unless otherwise terminated, this Agreement shall expire fifteen
(15) years from the date of first marketing in the last country in the Territory
in which a Product is marketed by Matrix.
8.4 In the event the Development of Compound or Product is terminated
altogether by Matrix for reasons of toxicology, safety, efficacy, product
stability or the like deemed unacceptable by the FDA or its equivalent non-U.S.
regulatory agency to commercialize Product, then this Agreement shall terminate
in its entirety and the license granted hereunder shall revert back to HMR. HMR
shall retain all upfront license fees and milestone payments it had received up
to the date of termination if, and only if, termination was not due to any
misrepresentations, omissions (of information owned or controlled by HMR or its
Affiliates as of the date hereof) or falsifications with respect to such
Know-How, information or data or fraud by HMR or its Affiliates, in which case
HMR shall repay in full to Matrix within ninety (90) days of such termination,
the upfront license fee and milestone payments HMR had received from Matrix up
to the date of such termination.
8.5 If either party materially fails or neglects to perform its
obligations set forth in this Agreement and if such default is not corrected
within sixty (60) days after receiving written notice from the other party with
respect to such default, such other party shall have the right to
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
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<PAGE>
terminate this Agreement by giving written notice to the party in default
provided the notice of termination is given within six (6) months of the default
and prior to correction of the default.
8.6 Matrix may terminate this Agreement in its entirety or with respect
to any country in the Territory by giving HMR at least thirty (30) days written
notice thereof based on a reasonable determination, using the same standards
Matrix would use in assessing whether or not to continue Development and
marketing of a product of its own making, that the patent, medical/scientific,
technical, regulatory or commercial profile of Compound or Product does not
justify continued Development or marketing of Compound or Product. Termination
of this Agreement with respect to any country in the Territory under this
provision shall terminate all licenses granted to Matrix in such country under
Article 2 with full reversion to HMR of all HMR's interest and rights in Patents
and Know-How in such country.
8.7 Either party may terminate this Agreement if, at any time, the
other party shall file in any court or agency pursuant to any statute or
regulation of any state or country, a petition in bankruptcy or insolvency or
for reorganization or for an arrangement or for the appointment of a receiver or
trustee of the party or of its assets, or if the other party proposes a written
agreement of composition or extension of its debts, or if the other party shall
be served with an involuntary petition against it, filed in any insolvency
proceeding, and such petition shall not be dismissed within sixty (60) days
after the filing thereof, or if the other party shall propose or be a party to
any dissolution or liquidation, or if the other party shall make a general
assignment for the benefit of creditors.
8.8 All rights and licenses granted under or pursuant to this Agreement
by HMR to Matrix are, and shall otherwise be deemed to be, for purposes of
Section 365(n) of the U.S. Bankruptcy Code, licenses of rights to "intellectual
property" as defined under Section 101(52) of the U.S. Bankruptcy Code. The
Parties agree that Matrix, as a licensee of such rights under this Agreement,
shall retain and may fully exercise all of its rights and elections under the
U.S. Bankruptcy Code, subject to performance by Matrix of its preexisting
obligations under this Agreement. The Parties further agree that, in the event
of the commencement of a bankruptcy proceeding by or against HMR under the U.S.
Bankruptcy Code, Matrix shall be entitled to a complete duplicate of (or
complete access to, as appropriate) any such intellectual property and all
embodiments of such intellectual property, and same, if not already in its
possession, shall be promptly delivered to Matrix (i) upon any such commencement
of a bankruptcy proceeding upon written request therefor by Matrix, unless HMR
elects to continue to perform all of its obligations under this Agreement, or
(ii) if not delivered under (i) above, upon the rejection of this Agreement by
or on behalf of HMR upon written request therefor by Matrix, provided, however,
that upon HMR's (or its successor's) written notification to Matrix that it is
again willing and able to perform all of its obligations under this Agreement,
Matrix shall promptly return all such tangible materials to HMR, but only to the
extent that Matrix does not require continued access to such materials to enable
Matrix to perform its obligations under this Agreement.
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9. RIGHTS AND DUTIES UPON TERMINATION
9.1 Upon termination of this Agreement, HMR shall (except as otherwise
provided herein) have the right to retain any sums already paid by Matrix
hereunder, and Matrix shall pay all sums accrued hereunder which are then due.
9.2 Termination of this Agreement shall terminate all future
obligations and rights between the Parties arising from this Agreement,
including but not limited to the payment obligations outlined in Article 3,
except those described in Sections 8.1, 8.3, 9.1, 9.2, 9.4, 10.3, 10.4, 10.5,
10.6, 10.7, 10.8, for data or other information generated or provided by either
Party during the term of the Agreement, and the rights and obligations of the
Parties pursuant to Sections 10.9, 12.1, 12.3, 12.4 and Articles 11, 13, 14, 15,
18, 19, 20, 21, 22, and 23 and except existing rights against the other Party
for a breach by that Party.
9.3 Termination of this Agreement under Section 8.5 for a default by
HMR shall terminate Matrix's obligation to make any remaining payments required
by Article 3 for the period effective as of the date HMR received written notice
from Matrix with respect to such default if after the elapse of sixty (60) days
from receipt of such notice such default is not corrected. Termination of this
Agreement with respect to all countries of the Territory under Section 8.6 shall
terminate Matrix's obligation to make any remaining payments required by Article
3 for periods after the effective date of termination.
9.4 All rights to terminate, and rights upon termination provided for
either Party in this Agreement are in addition to other remedies in law or
equity which may be available to either Party.
9.5 Upon early partial or entire termination of this license Agreement
pursuant to Sections 8.4, 8.5 (as to Matrix defaults), or 8.6, HMR shall receive
an exclusive (even as to Matrix, but subject to any Third Party's then-existing
rights) right and license, with the right to grant sublicense, to all data, know
how, results and other information related to the Compound or Product and
generated by Matrix, its Affiliates and Sublicensees, to import, use, sell,
offer for sale, and have sold Product in the countries of the Territory where
the Agreement was terminated. Any IND or other regulatory filing effected prior
to termination (for each country in which such termination is effective) shall
be assigned by Matrix to HMR (or its designees). Matrix shall provide to HMR
within one (1) month of HMR's request, copies of all regulatory correspondence,
including, but not limited to, IND Information Amendments, IND Reports, IND
Safety Reports, NDA Submission, NDA Post-marketing Reports, and reports of
written/phone contacts to/from regulatory agencies, as well as the safety
database (as applicable). In addition, Matrix shall provide reasonable
assistance to HMR, at Matrix's expense if such termination is pursuant to
Sections 8.5 or 8.6, otherwise at HMR's expense, for the transfer of such data,
know how, results and other information related to the Compound or Product and
generated by Matrix, its Affiliates, and Sublicensees prior to such termination,
such transfer to be completed by Matrix within one (1) month of such
termination.
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10. EXCHANGE OF INFORMATION AND CONFIDENTIALITY
10.1 Upon the signing of this Agreement, HMR shall deliver to Matrix
all available Know-How through documentation, consultation, and face-to-face
meetings, which is owned or controlled by it and its Affiliates, and which may
be reasonably expected to assist Matrix in developing, registering, and
manufacturing Compound and Product in the Territory ("HMR Information"). After
the execution of this Agreement, there shall be a three (3) months transition
during which HMR shall provide, reasonable resources, expertise, Know-How and
documents to effectively transfer the Development activity to Matrix with the
limitations as described in this Agreement. At the end of such three (3) month
period, the parties shall discuss in good faith whether the information and
technology transfer process has been satisfactorily completed. In the event that
Matrix feels it has not appropriately received such information or related
assistance, then the parties shall in good faith determine an alternative
procedure to properly complete such transition process, and the Parties shall
implement such procedure during the three (3) months immediately following such
determination. Thereafter and for the remaining term of this Agreement, HMR
shall be obligated to provide only such assistance to Matrix which is limited to
material historical information and technology.
10.2 Within ten (10) days after the date of the receipt of written
notification, HMR shall transfer the U.S. IND, including without limitation, the
drug master file ("DMF"), for Compound or Product to Matrix. Until such transfer
is made, Matrix shall have the right to make reference to such Compound or
Product owned or controlled by HMR or its Affiliate.
10.3 HMR may not, during the term of this Agreement and for a period of
[*] after the date of termination of this Agreement, disclose or reveal to Third
Parties any confidential information received from Matrix or otherwise developed
by Matrix in the performance of activities in furtherance of this Agreement
which relates substantially to a Compound or Product that Matrix has in
Development or is commercializing, except in the event that rights granted under
this Agreement shall revert to HMR pursuant to Section 9.5 and solely for the
purpose of finding a licensee to such reverted rights. This confidentiality
obligation shall not apply to such information which is or becomes a matter of
public knowledge, or came or comes into the possession of HMR independently of
this Agreement (unless otherwise disclosed confidentially at any time by Matrix
to HMR), or is disclosed to HMR by a Third Party having the right to do so, or
is subsequently and independently developed by employees of HMR or Affiliates
thereof who had no knowledge of the confidential information disclosed. The
Parties shall take reasonable measures to ensure that no unauthorized use or
disclosure is made by others to whom access to such information is granted.
10.4 Matrix may not, upon the termination of this Agreement and for a
period of [*] after the date of termination of this Agreement, disclose or
reveal to Third Parties any confidential information received from HMR or
otherwise developed by HMR in the performance of activities in furtherance of
this Agreement which relates to a Compound or Product that HMR has in
Development or is commercializing. Matrix shall bind any Sublicensee to the same
terms of confidentiality relating to the Compound or Product. This
confidentiality obligation shall not apply to such information which is or
becomes a matter of public knowledge,
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
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or came or comes into the possession of Matrix independently of this Agreement
(unless otherwise disclosed confidentially at any time by HMR to Matrix), or is
disclosed to Matrix by a Third Party having the right to do so, or is
subsequently and independently developed by employees of Matrix or Affiliates
thereof who had no knowledge of the confidential information disclosed. The
Parties shall take reasonable measures to ensure that no unauthorized use or
disclosure is made by others to whom access to such information is granted.
10.5 Nothing herein shall be construed as preventing either party from
disclosing any information received from the other party to an Affiliate or
Sublicensee of the receiving party, provided such Affiliate or Sublicensee has
undertaken a similar obligation of confidentiality with respect to the
confidential information.
10.6 Nothing herein shall be construed as preventing Matrix or HMR from
disclosing information received from the disclosing Party for the purposes of
investigating, developing, manufacturing, or marketing Compound or Product or
for securing essential or desirable authorizations, privileges or rights from
governmental agencies, or as is required to be disclosed to a governmental
agency or as is necessary to file or prosecute patent applications concerning
Compound or Product or to carry out any litigation concerning Compound or
Product.
10.7 All confidential information disclosed by one party to the other
shall remain the intellectual property of the disclosing party. In the event
that a court or other legal or administrative tribunal, directly or through an
appointed master, trustee or receiver, assumes partial or complete control over
the assets of a party to this Agreement based on the insolvency or bankruptcy of
such party, the bankrupt or insolvent party shall promptly notify the court or
other tribunal (i) that confidential information received from the other party
under this Agreement remains the property of the other party and (ii) of the
confidentiality obligations under this Agreement. In addition, the bankrupt or
insolvent party shall, to the extent permitted by law, take all steps necessary
or desirable to maintain the confidentiality of the other party's confidential
information and to insure that the court, other tribunal or appointee maintains
such information in confidence in accordance with the terms of this Agreement.
10.8 No public announcement or other disclosure to Third Parties
concerning the existence of or terms of this Agreement shall be made, either
directly or indirectly, by either party to this Agreement, except as may be
legally required or as may be required for recording purposes, without first
obtaining the written approval of the other party and agreement upon the nature
and text of such announcement or disclosure, provided that such approval shall
not be unreasonably withheld.
The party desiring to make any such public announcement or other
disclosure shall use reasonable efforts to inform the other party of the
proposed announcement or disclosure in reasonably sufficient time prior to
public release, and shall use reasonable efforts to provide the other party with
a written copy thereof, in order to allow such other party to comment upon such
announcement or disclosure.
10.9 HMR shall not submit for written or oral publication any
manuscript, abstract or the like which includes data or other information
generated or provided by either party in the
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course of, or otherwise as a result of Development or otherwise related to
Compound or Product, without first obtaining the prior written consent of
Matrix. The contribution of each party shall be noted in all publications or
presentations by acknowledgment or coauthorship, whichever is appropriate.
10.10 Nothing in this Agreement shall be construed as preventing or in
any way inhibiting either party from complying with statutory and regulatory
requirements governing the manufacture, use and sale or other distribution of
Compound or Product in the Territory in any manner it reasonably deems
appropriate, including, for example, by disclosing to regulatory authorities
confidential or other information received from each other or Third Parties.
11. INVENTIONS, PATENTS AND PATENT PROSECUTION
11.1 HMR shall provide Matrix with a copy of the complete texts of all
Patents filed by HMR prior to the Effective Date which relate to Compound or
Product as well as all information received concerning the institution or
possible institution of any interference, opposition, re-examination, reissue,
revocation, nullification or any official proceeding involving a Patent anywhere
in the Territory. Matrix shall have the right to review all such Patents and all
proceedings related thereto and make recommendations to HMR concerning material
aspects of their conduct. HMR agrees to copy Matrix on all aspects of the
prosecution or other proceedings of such Patents including by providing Matrix
with copies of substantive communications, search reports and third party
observations submitted to or received from patent offices within the Territory.
Matrix shall provide such patent consultation to HMR related to such Patents at
no cost to HMR. Matrix shall have the right to assume responsibility for any
such Patent or any part of any such Patent which HMR intends to abandon or
otherwise cause or allow to be forfeited provided that the claims of such Patent
covers Compound or Product.
12. PATENT LITIGATION
12.1 In the event of the institution of any suit by a Third Party
against HMR, Matrix and/or its Sublicensee for patent infringement involving the
manufacture, use, sale, distribution or marketing of Compound or Product
anywhere in the Territory, the party sued shall promptly notify the other party
in writing. Matrix shall have the right but not the obligation to defend such
suit at its own expense. HMR and Matrix shall assist one another and cooperate
in any such litigation at the other's request without expense to the requesting
party.
12.2 In the event that HMR or Matrix becomes aware of actual or
threatened infringement of a Patent related to Compound or Product, anywhere in
the Territory, or any alleged patent invalidity or non-infringement of patent or
patents pursuant to a paragraph IV patent certification by a party filing an
Abbreviated New Drug Application ("ANDA"), that party shall promptly notify the
other party in writing, but in any event no later than ten (10) business days
after receipt of notice of such action. HMR shall have the first right but not
the obligation to bring, at its own expense, an infringement action or file any
other appropriate action or claim directly, related to infringement of a Patent
owned in whole or in part by HMR, wherein such infringement relates to Compound
or Product, against any Third Party and to use Matrix's name in connection
therewith. If HMR does not commence a particular infringement action within
15
<PAGE>
ninety (90) days after it received such written notice, Matrix, after notifying
HMR in writing, shall be entitled to bring such infringement action or any other
appropriate action or claim at its own expense. The party conducting such action
shall have full control over its conduct, including settlement thereof. In any
event, HMR and Matrix shall assist one another and cooperate in any such
litigation at the other's request without expense to the requesting party.
12.3 HMR and Matrix shall recover their respective actual out-of-pocket
expenses, or equitable proportions thereof, associated with any litigation or
settlement thereof from any recovery made by any party. Any excess amount shall
be shared between Matrix and HMR, with each party receiving an amount
proportional to the amount spent by such party on such litigation or settlement
thereof relative to the total amount spent by both Parties on such litigation or
settlement thereof.
12.4 The Parties shall keep one another informed of the status of and
of their respective activities regarding any litigation or settlement thereof
concerning Compound or Product.
12.5 HMR shall authorize Matrix to act as HMR's agent for the purpose
of making any application for any extensions of the term of Patents or
application for Supplementary Protection Certificate or any other application
for equivalent right of which HMR is entitled to act as such an agent in any
country of the Territory in which such extensions are or become available, and
shall provide reasonable assistance therefor to Matrix, at HMR's expense.
12.6 Each party shall provide prompt notice to the other of any
inquiries as to any Patent which have claims to manufacturing processes, which
inquiries are provided pursuant to 35 USC ss. 271(g), and shall cooperate with
respect to responses thereto.
12.7 Each party shall provide (i) notice of patents relevant to a US
NDA, prior to the time the NDA is filed, and (ii) immediate notice of the
issuance of any other patents relevant to a US NDA and the parties shall jointly
decide within thirty (30) days of the patent issue date, if the patent is to be
listed pursuant to any Drug Approval Application (particularly in Canada) and
any pending or approved Health Registration or NDA in the United States for
Product.
13. TRADEMARKS AND TRADE NAMES
13.1 Matrix, at its expense, shall be responsible for the selection,
registration and maintenance of all trademarks and trade names which it employs
in connection with any Product. Nothing in this Agreement shall be construed as
a grant of rights, by license or otherwise, to HMR to use such trademarks and
trade names or any other trademarks and trade names owned by Matrix for any
purpose. Matrix shall own such trade names and trademarks and shall retain such
ownership upon termination of this Agreement.
13.2 Nothing in this Agreement shall be construed as a grant of rights,
by license or otherwise, to either party, to use the name of the other party or
any entity affiliated therewith for any purpose whatsoever except as may
otherwise be expressly provided for in this Agreement.
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<PAGE>
13.3 If rights granted to Matrix under this Agreement in a country
shall revert to HMR pursuant to Sections 8.4 and 8.6 above, HMR shall have the
option to obtain a royalty free license to any Matrix trademark relating to the
Product in such country.
14. STATEMENTS AND REMITTANCES
14.1 Matrix shall keep and require its Affiliates and Sublicensees to
keep complete and accurate records of all sales of Product under the licenses
granted herein. HMR shall have the right, at HMR's expense, through a certified
public accountant or like person reasonably acceptable to Matrix, to examine
such records during regular business hours during the life of this Agreement and
for six (6) months after the later of its termination or the last sale of
Product by Matrix subject to the royalty obligations outlined in Section 3.2;
provided, however, that such examination shall not take place more often than
once a year and shall not cover such records for more than the preceding two (2)
years and provided further that such accountant shall report to HMR only as to
the accuracy of the royalty statements and payments. However, if the
accountant's report results in finding an error which resulted in an under or
overpayment of royalties on Net Sales more than [*] then the expense of the
examination shall be borne by Matrix (provided HMR shall first refund to Matrix
any overpayment reflected by such audit). The new Net Sales calculations shall
apply.
14.2 Within sixty (60) days after the close of each calendar quarter,
Matrix shall deliver to HMR a true accounting of all Product sold by Matrix and
its Sublicensees during such quarter and shall at the same time pay all
royalties due. Such accounting shall show gross sales and Net Sales on a
country-by-country and Product-by-Product basis.
14.3 Any tax paid or required to be withheld by Matrix on account of
royalties payable to HMR under this Agreement shall be deducted from the amount
of royalties otherwise due. Matrix shall secure and send to HMR written proof of
any such taxes withheld and paid by Matrix or its Sublicensees for the benefit
of HMR in a form sufficient to satisfy the United States Internal Revenue
Service.
14.4 All payments due under this Agreement shall be payable in U.S.
dollars. In each country where the local currency is blocked or cannot be
removed from such country, Matrix will pay the royalty owed on sales in that
country in U.S. dollars to HMR at the exchange rate set forth in Section 3.5.
15. WARRANTIES, REPRESENTATIONS, INSURANCE, AND INDEMNIFICATIONS
15.1 As of the Effective Date, HMR warrants that, to the best of its
belief and knowledge, it owns the entire right and title to the extent of its
ownership interest in Patents and Know-How, has the right to grant the license
outlined in Article 2 with respect to Patents and Know-How, and has the right to
enter into this Agreement.
15.2 HMR warrants that, as of the Effective Date, it has disclosed to
Matrix the complete texts of all Patents as well as all information received
concerning the institution or possible institution of any interference,
opposition, re-examination, reissue, revocation,
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
17
<PAGE>
nullification or any official proceeding involving a Patent anywhere in the
Territory. Nothing in this Agreement shall be construed as a warranty that
Patents are valid or enforceable or that their exercise does not infringe any
valid patent rights of Third Parties. HMR hereby represents that it has no
present knowledge from which it can be inferred that Patents are invalid or that
their exercise would infringe valid patent rights of Third Parties. A holding of
invalidity or unenforceability of any Patent, from which no further appeal is or
can be taken, shall not affect any obligation already accrued hereunder.
15.3 HMR acknowledges that, in entering into this Agreement, Matrix has
relied or will rely upon information supplied by HMR, information to be supplied
by HMR, and information which HMR has caused or will cause to be supplied to
Matrix by HMR's agents and/or representatives, pursuant to Articles 6 and 10 of
this Agreement and HMR warrants and represents that, to the best of its belief
and knowledge, all such information is and will be timely and accurate in all
material respects. HMR further warrants and represents that it has not, up
through and including the Effective Date, omitted to furnish Matrix with any
information requested by Matrix concerning the Compound or Product or the
transactions contemplated by this Agreement, which would be material to Matrix's
decision to enter into this Agreement and to undertake the commitments and
obligations set forth herein.
15.4 HMR warrants and represents that it has no present knowledge of
the existence of any pre-clinical or clinical data or information concerning the
Compound or Product which suggests that there may exist toxicity, safety and/or
efficacy concerns which may materially impair the utility and/or safety of the
Compound or Product, other than as has already been disclosed to Matrix.
15.5 Subject to Section 15.8, Matrix shall indemnify and hold harmless
HMR, its officers, directors, shareholders, employees, successors and assigns
from any loss, damage, or liability, including reasonable attorney's fees,
resulting from any claim, complaint, suit, proceeding or cause of action against
any of them alleging physical or other injury, including death, brought by or on
behalf of an injured party; loss of service or consortium or a similar such
claim, complaint, suit, proceeding or cause of action brought by a friend,
spouse, relative or companion of an injured party due to such physical injury or
death and rising out of the administration, utilization and/or ingestion of
Compound or Product manufactured, sold or otherwise provided to the injured
party by Matrix (or its permitted Sublicensee or other third parties such as
contract manufacturers), except to the extent such damages, claims, costs,
losses, liabilities or expenses are directly and proximately caused by HMR's
negligent or wrongful actions and provided:
(a) Matrix shall not be obligated under this Section if it is
shown by evidence acceptable in a court of law having jurisdiction over the
subject matter and meeting the appropriate degree of proof for such action, that
the injury was the result of the negligence or willful misconduct of any
employee or agent of HMR;
(b) Matrix shall have no obligation under this Section unless
HMR (i) gives Matrix prompt written notice of any claim or lawsuit or other
action for which it seeks to be
18
<PAGE>
indemnified under this Agreement, (ii) Matrix is granted full authority and
control over the defense, including settlement, against such claim or lawsuit or
other action, and (iii) HMR cooperates fully with Matrix and its agents in
defense of the claims or lawsuit or other action; and
(c) HMR shall have the right to participate in the defense of
any such claim, complaint, suit, proceeding or cause of action referred to in
this Section utilizing attorneys of its choice, provided, however, that Matrix
shall have full authority and control to handle any such claim, complaint, suit,
proceeding or cause of action, including any settlement or other disposition
thereof, for which HMR seeks indemnification under this Section.
15.6 Subject to Section 15.8, HMR shall defend, indemnify and hold
harmless Matrix and its officers, directors, shareholders, employees, successors
and assigns from and against any and all damages, claims, costs, losses,
liabilities or expenses (including reasonable attorneys' fees) arising out of,
or resulting from or in connection with HMR's activities under this Agreement
including, but not limited to HMR's activities related to Development, HMR's
transfer of Know-How to Matrix, and any breach of a representation or warranty
made to Matrix by HMR under this Agreement, except such damages, claims, costs,
losses, liabilities or expenses which are directly and proximately caused by
Matrix's negligent or wrongful actions, provided Matrix shall have the right to
participate in the defense of any such claim, complaint, suit, proceeding or
cause of action referred to in this Section utilizing attorneys of its choice,
provided, however, that HMR shall have full authority and control to handle any
such claim, complaint, suit, proceeding or cause of action, including any
settlement or other disposition thereof, for which Matrix seeks indemnification
under this Section. HMR shall have no obligation under this Section unless
Matrix (i) gives HMR prompt written notice of any claim or lawsuit or other
action for which it seeks to be indemnified under this Agreement, and (ii)
Matrix cooperates fully with HMR and its agents in defense of the claims or
lawsuit or other action.
15.7 Subject to Section 15.8, Matrix shall defend, indemnify and hold
harmless HMR and its officers, directors, shareholders, employees, successors
and assigns from and against any and all damages, claims, costs, losses
liabilities or expenses (including reasonable attorneys' fees) arising out of,
or resulting from or in connection with Matrix's activities under this
Agreement, including, but not limited to Matrix's activities related to
Development, or any breach of a representation or warranty made to HMR by Matrix
under this Agreement, except such damages, claims, costs, losses, liabilities or
expenses which are directly and proximately caused by HMR's negligent or
wrongful actions, provided HMR shall have the right to participate in the
defense of any such claim, complaint, suit, proceeding or cause of action
referred to in this Section utilizing attorneys of its choice, provided,
however, that Matrix shall have full authority and control to handle any such
claim, complaint, suit, proceeding or cause of action, including any settlement
or other disposition thereof, for which HMR seeks indemnification under this
Section. Matrix shall have no obligation under this Section unless HMR (i) gives
Matrix prompt written notice of any claim or lawsuit or other action for which
it seeks to be indemnified under this Agreement, and (ii) HMR cooperates fully
with Matrix and its agents in defense of the claims or lawsuit or other action.
19
<PAGE>
15.8 As between Matrix and HMR, Matrix shall be solely responsible for
any Liabilities ("Matrix Liabilities") on or after the Effective Date during the
term of this Agreement caused in a country where Matrix held the rights granted
in this Agreement at the time the Matrix Liabilities were caused; provided
however, in the event that the rights granted in this Agreement shall revert to
HMR in any country for any reason, HMR shall be solely responsible for any
Liabilities ("HMR Liabilities") caused in any such country where HMR held such
reverted rights at the time the HMR Liabilities were caused. These obligations
shall survive the termination of this Agreement.
15.9 During the term of this Agreement and for a period of five (5)
years after its expiration or earlier termination, each party shall obtain
and/or maintain, respectively, at its sole cost and expense, product liability
insurance in amounts, respectively, which are reasonable and customary in the
U.S. pharmaceutical industry for companies of comparable size and activities.
Such product liability insurance shall insure against all liability, including
product liability, personal liability, physical injury or property damage. Each
party shall provide written proof of the existence of such insurance to the
other party upon request therefor.
16. FORCE MAJEURE
16.1 If the performance of any part of this Agreement by either party,
or of any obligation under this Agreement, is prevented, restricted, interfered
with or delayed by reason of any cause beyond the reasonable control of the
party liable to perform, unless conclusive evidence to the contrary is provided,
the party so affected shall, upon giving written notice to the other party, be
excused from such performance to the extent of such prevention, restriction,
interference or delay, provided that the affected party shall use its reasonable
best efforts to avoid or remove such causes of non-performance and shall
continue performance with the utmost dispatch whenever such causes are removed.
When such circumstances arise, the Parties shall discuss what, if any,
modification of the terms of this Agreement may be required in order to arrive
at an equitable solution.
17. GOVERNING LAW
17.1 This Agreement shall be construed and governed in accordance with
the law of the State of Delaware and the United States of America, without
giving effect to conflict of law provisions.
18. DISPUTE RESOLUTION
18.1 Any dispute, controversy or claim (except as to any issue relating
to intellectual property owned in whole or in part by HMR) arising out of or
relating to this Agreement, or the breach, termination, or invalidity thereof,
shall be settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, except as modified by this
Section 18.1. The number of arbitrators shall be three (3). The arbitration
decision shall be binding and not be appealable to any court in any
jurisdiction. No arbitrator (nor the panel of arbitrators) shall have the power
to award punitive damages under this Agreement and such award is expressly
prohibited. The prevailing party may enter such decision in any court having
20
<PAGE>
competent jurisdiction. The arbitration proceeding shall be conducted in the
English language in New York, New York unless the Parties agree in writing to
conduct the arbitration in another location.
19. SEPARABILITY
19.1 In the event any portion of this Agreement shall be held illegal,
void or ineffective, the remaining portions hereof shall remain in full force
and effect.
19.2 If any of the terms or provisions of this Agreement are in
conflict with any applicable statute or rule of law, then such terms or
provisions shall be deemed inoperative to the extent that they may conflict
therewith and shall be deemed to be modified to conform with such statute or
rule of law.
19.3 In the event that the terms and conditions of this Agreement are
materially altered as a result of Sections 19.1 or 19.2, the Parties will
renegotiate the terms and conditions of this Agreement to resolve any
inequities.
20. ENTIRE AGREEMENT
20.1 This Agreement, entered into as of the Effective Date, constitutes
the entire agreement between the Parties relating to the subject matter hereof
and supersedes all previous writings and understandings. No terms or provisions
of this Agreement shall be varied or modified by any prior or subsequent
statement, conduct or act of either of the Parties, except that the Parties may
amend this Agreement by written instruments specifically referring to and
executed in the same manner as this Agreement.
21. NOTICES
21.1 Any notice required or permitted under this Agreement shall be
sent by certified mail or overnight courier service, postage pre-paid to the
following addresses of the Parties:
If to HMR: Hoechst Marion Roussel
Route 202-206
P.O. Box 6800
Bridgewater, NJ 08807-0800
Attention: General Counsel
Telephone: (908) 231 3537
Facsimile: (908) 231 2243
21
<PAGE>
With copies to: Hoechst Marion Roussel
Route 202-206
P.O. Box 6800
Bridgewater, NJ 08807-0800
Attention: Vice President, Licensing & Alliances
Telephone: (908) 231 3509
Facsimile: (908) 231-3730
If to Matrix: Matrix Pharmaceutical, Inc.
34700 Campus Drive
Fremont, CA 94555
Attention: Harry D. Pedersen, Vice President
Telephone:(510) 742-9900
Facsimile:(510) 510-8510
With copies to: Brobeck Phleger & Harrison LLP
Two Embarcadero Place
2200 Geng Road
Palo Alto, CA 94303-1913
Attention: J. Stephan Dolezalek, Esq.
Telephone:(650) 496-2842
Facsimile:(650) 496-2736
21.2 Any notice required or permitted to be given concerning this
Agreement shall be effective upon receipt by the party to whom it is addressed.
22. ASSIGNMENT
22.1 This Agreement and the licenses herein granted shall be binding
upon and inure to the benefit of the successors in interest of the respective
Parties. Neither this Agreement nor any interest hereunder shall be assignable
by either party without the written consent of the other provided, however, that
either party may assign this Agreement or any Patent owned by it to any
Affiliate or to any corporation with which it may merge or consolidate, or to
which it may transfer all or substantially all of its assets to which this
Agreement relates, without obtaining the consent of the other party.
23. EXECUTION IN COUNTERPARTS
23.1 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
22
<PAGE>
23.2 IN WITNESS WHEREOF, the Parties, through their authorized
officers, have executed this Agreement as of the date first written above.
HOECHST MARION ROUSSEL INC. MATRIX PHARMACEUTICAL, INC.
By: ________________________________ By: ________________________________
Name: ______________________________ Name: _______________________________
Title: _____________________________ Title: ______________________________
23
<PAGE>
APPENDIX A-PATENTS
[*]
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
<PAGE>
APPENDIX B
[*]
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
<PAGE>
APPENDIX C DEVELOPMENT PLAN
[*]
* Indicates that material has been omitted and confidential treatment has been
requested therefore. All such omitted material has been filed separately with
the Commissioner pursuant to Rule 24b-2.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 21,569
<SECURITIES> 43,829
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,306
<PP&E> 18,637
<DEPRECIATION> (4,698)
<TOTAL-ASSETS> 93,878
<CURRENT-LIABILITIES> 11,495
<BONDS> 0
0
0
<COMMON> 225,237
<OTHER-SE> (163,071)
<TOTAL-LIABILITY-AND-EQUITY> 93,878
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 25,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,280
<INCOME-PRETAX> (15,446)
<INCOME-TAX> 0
<INCOME-CONTINUING> (15,446)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,446)
<EPS-PRIMARY> (0.70)
<EPS-DILUTED> (0.70)
</TABLE>
